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tv   Tavis Smiley  WETA  October 2, 2012 12:00am-12:30am EDT

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tavis: good evening. from los angeles, i am tavis smiley. a conversation with sheila bair. one of the heroes of the financial crisis. she has just released a new text. the book is called "bull by the horns." we're glad you have joined us. >> there is a saying that dr. king had that said there is always the right time to do the right thing. i try to live my life every day by doing the right thing. we know that we are only halfway to completely eliminating hunger and we have work to do. walmart committed $2 billion to fighting hunger in the u.s.
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as we work together, we can stamp hunger out. >> and by contributions to your pbs station from viewers like you. thank you. tavis: sheila bair is the former chair of the fdic. her efforts to take on wall street excess and stand up for average americans is the subject of the new text "bull by the horns."
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good to have you on this program. >> thank you for having me. tavis: let me start with the news of this week. everybody knows in 48 hours, for the first time, mitt romney and mr. obama will come face to face in a debate. if you were jim wednesday night, where these issues are concerned, at the economy, how we avoid what has happened already, how we avoid falling into another recession, around those issues, what ought to be debated wednesday night? >> they should be challenged about whether we want a sustainable financial system. will both presidents appoint people to their economic team who will see the economic interest of the people probably? -- broadly? will they appoint regulators who will be independent of wall
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street? will they support them when they need to make decisions? will this president protect regulators when congress tries to beat up on them? did they recognize the crucial connection between our economic growth and prosperity? tavis: if you were going to appoint regulators and others not connected to wall street without looking for names, where would you look for those types of people? whenever you talk about financial issues, the people who in-depth writing these institutions -- to end up running these institutions, they always seem to come from the same pool of choices. >> it is bipartisan, republicans
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and democrats, on the hill, the regulatory community. we need more of them. i would say to the people, will you commit to never work for a financial institute you regulate? sometimes, the people who are the best regulators are people who used to be industry. they understand the issues better than anyone. you have the industry background, but i have no interest never going back. they're also good former regulators with proven track records. elizabeth warren would have made a very good regulator. there are people out there, but the president needs to find them. tavis: how much of this is the problem of the revolving door?
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this is always the case in washington. he talked about the cozy relationship between wall street and washington. it seems to be the case where money matters that there is a revolving door. i could do this all day from larry summers, there is a long list of people. how much of this is a problem? >> it is not so in nefarious. people start to view the world from the perspective of large financial institutions. they're not able to differentiate. you need much greater diversity of perspective. congress and the staff, not as with political appointees. examiners can go work for industry, too. there should be a lifetime ban.
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we want that to be a foreign service. this is a prestigious thing. the need to -- make a commitment to never work for the industry they regulated. tavis: how much of the drama we have been stored in these four years of the obama administration have specifically to do with the people that he chose? bad personal choices? >> i have tried very hard -- i had a lot of disagreements with secretary geithner. i think to am always tried to do wh e thought was best for the country -- tim to do what he thought was best for the country. that was very much the regulatory framework, correcting markets, wall street is king. this will benefit us all.
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it was that kind of a mindset. i think we did a fresh mind said. i suggested paul volcker to be secretary of treasury. they just had a different philosophy and a different perspective about how you get to a broader economic interest. they thought taking care of wall street would take care of our economic interests. i wanted to impose some pain and suffering. tavis: how to describe -- how would you describe your relationship with tim geithner? you mentioned that you had a bumpy relationship. here is a guy who was pushing for your ouster. called the work with somebody -- how do you work with somebody who is pushing to have you ousted? >> that was difficult and never told me that directly. i reached out -- reached out to them after those press reports were leaked and tried to have a
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conversation. that was one of the many problems, he did not communicate a lot with me directly. that would have helped. i dilee feel that he viewed me s an adversary, someone to force to take a position, as opposed to someone to have a two-way conversation with. i had a very specific public mandate. we have a process for dealing with failed institutions. it is as rough as a bankruptcy process. probably tougher. it was a difficult relationship. i do not question his motives. i think he was doing what he thought was best for the country, but he has a perspective that was formed by his tenure as head of the new york fed.
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it also functions closely with the wall street banks. tavis: when you're writing this, you were getting more and more angry as you had to relive all of this. the more that you got in the rearview mirror, it has allowed you to see that this could have been avoided. >> you always have downturns. that is part of the system. leading up to the crisis, we should of that mortgage lending standards. the fed had the ability to write mortgage lending standards. they did not. leveraged -- using other people's money to take risks. leverage was going up during the crisis and the fed was trying to implement some new rules that would have allowed big institutions to take on even more leverage. we fought that to send help. the fdic was fighting a battle.
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derivatives is a prime example, congress passed a law that provided anybody. as a result, we got into the crisis, we had hundreds of trillions of derivatives that were based on these mortgages. how the derivatives performed would be based on how mortgages were performing. and nobody had good information about this market. those are key mistakes rubbermaid leading up to the crisis. -- does for key mistakes that were made leading up to the crisis. the regulators should have stood up to it. the pressure was relentless from the industry. and you still see it now as they tried to implement dodd-frank. tavis: you were a regulator. how much of this crisis had to
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do with regulators who just got rolled? >> a lot of it did. i have some anecdotes. you cannot win with the industry. not all banks -- there were some banks that are not part of the problem. there are some banks trying to help the reform process. a lot of industry lobbyists to weight -- who were in an irresponsible part of the crisis. the fdic was pushing very hard to tighten lending standards for subprime loans for the banks that the insured. we've been getting some resistance from the other regulators. they came and and they have but we call these intimidation meetings. sitting around a big conference table, all telling me how i was going to construct credit. it made me so angry when these folks would say, lower income people are not going to get a mortgage. i just wanted to throttle them.
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they said, these are not affordable loans. and they started bashing the borrower. these people, instead of paying their mortgage, they will go do something else. how do you feel that way? it was very offensive. we went ahead and we in the summer of 2007, we got be tougher lending standards, and in the fall of 2007, we knew a lot of the problems were already there. these horrible subprime mortgages had been made. we could see the delinquencies on the foreclosure rates. we brought a bunch of industry people and to try to get them to agree to start restructuring these loans. convert them back to a 30-year fixed mortgage.
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convert them into a fixed-rate mortgage. we have but we thought were assurances. they did not do that. in the fall, i went to wall street and gave a speech and i took them to task. why aren't you helping? why aren't you getting this loans restructured? in the back of the ram, here we go again, these people, we cannot help these people. same disdain for bar worse. if we lower their payment, they will just go buy a flat screen tv. he said bad regulation. in january -- so much for self correcting markets. now they were blaming the regulators for all of these loans that are going bad. in january they had been in my office you can not tighten lending standards. in the fall they were saying, it is all your fault.
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it really weakens your interest in listening to anything they have to say, frankly. tavis: you mentioned dodd-frank, that is supposed to be the way forward. there are a lot of us who think there is not bite in dodd-frank. tell me how tough it dodd-frank is. >> dodd-frank against regulators authority to be very tough, but it is up to the regulators. i would agree with you, the response implementation so far has been somewhat tepid. part of that, again, is relentless industry lobbying. members of congress have tried to stop regulationthe sec have
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to be funded every year through congressional appropriations. other regulators are self- funded. they do not have to go to congress for funding. industry lobbyists to try to hold back their appropriations. it is a very difficult situation. the present needs to stand up and support of the regulatory process. have the back of the regulators. the regulators need to stand up to it, to permit the volcker rule was the prime example of something that could be very positive to constrain risk- taking on wall street. the role that was proposed have a lot of exceptions to it, carried detailed and complex, it very difficult to enforce. i am hoping they simplify it before they do. again, it is up to the regulators to use these tools.
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dodd-frank gave them the tools, but they have to use them. tavis: is it possible, how would you randy's lobbyist? i know how washington works -- to rain and these lobbyists? i know how washington works. i'm trying to figure out if it is possible? >> it is not a problem unique to the financial services industry. there is such a low confidence level with the public. a lot of this is because of the perception that these well-paid lobbyists are running everything. it is a good question. having independent regulators, up one of the recommendations, the lobbyists, and other where they harass regulators is by threatening to tie up their senate confirmation. that has been a real problem with a number of them. i suggest that people who are nominated should have their right to an up or down vote.
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in the senate, a lobbyist can convince one senator to type a confirmation, it can take months. it is a real problem. it is always the right balance between the first amendment and the right to advocate versus the need to have a process with integrity. tavis: there are a lot of great stories in this book. i want to let you tell it's in your own words. we get a chance to hear from somebody who was in the room when this went down. there is a scene in the book, the moment when president obama is going off about these aig loans. he has gone off in the room. >> i was driving into work and i got a call on my blackberry and i answered it and it was >tim.
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he said the president wanted to see me at 10:00 that morning. i went in and was ushered right into the oval office and the president was sitting there in a chair in from the fireplace. there were couches on either side of where he was sitting. tim and larry was sitting there facing each other. i could not figured out what was going on. the president asked me to sit down. he said, did you read about the aig bonuses? it was amazing, they had paid all of these millions in bonuses to these idiots, frankly, who had done all the trading. i knew what i had read in the paper.
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deborah sitting there looking uncomfortable. he wanted to know if i had any thoughts about what he could do about it. i did not have the facts. favor legally obliged to pay these bonuses. i took that at face value, but i thought it was outrageous. i told him about being fdic's process. we can take control of an institution but sometimes you do need to pay people, but you can control that. i basically -- i tried to be constructive. i did not want to express the outrage -- that was when i first pitch to him the idea of having a reform that would give the fdic the power to put these very large institutions into a bankruptcy-like process where they would be punished.
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he was later very supportive of this piece of the dodd-frank bill. it was clear to me that he was quite upset and all my interactions with him, i think he gets it. he has a main street guy. i do think he wanted -- he did it for all the right reasons. he was worried about the financial system being stable. tim and larry had a good mechanical skills, but they did not have the same sense of urgency. especially in helping homeowners. there were very focused on these very large financial institutions. tavis: there is another story of a big meeting. but coverage on this program. everybody would call it the big meeting. the tarp funding. i will let you tell the story, but i was blown away by the first question. the country is being told that these institutions, if they
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fail, the country fails. you'll have this emergency meeting in washington. the first question -- >> i cannot remember the exact -- the question that stood out was the most outrageous, he just sold himself to bank of america. he was worried about compensation. he was worried if there were born to be restrictions on his compensation if he took the bailout money. merrill lynch was in pretty bad shape. it was unbelievable to me. tavis: how was this going to impact my executive pay package? >> it was reflective of the attitude, the entitlement attitude. we are the big important rich guys and we're of this
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compensation. where the center of the economy. it really makes me angry. i do think it is not that unusual in this wall street culture. ken lewis said, i do not think it is appropriate to be talking about compensation. tavis: you talk about it openly in the book, i appreciate the fact that you admit that there were moments of hesitation or trepidation about walking in certain rooms knowing that you were going to be the only woman in the room. what was like being the only woman during this major crisis?
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>> you never know if it is about gender or something else. there was resistance throughout the crisis. i was always being invited to a meeting -- they had already made the decision what they were going to do. ben bernanke, i like and respect him. we had a good relationship. i was very disappointed -- we did talk from time to time. with tim, i never felt that was the case. i felt like they were off making decisions and asking me to comment to let me know what was going on. young women asked me about this.
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you kind of drive yourself crazy wondering if it is about gender or not. understand that you were going to have to work harder and be better prepared. do not give up, you have the right to be heard and part of the decision making. tavis: there are a number of names floating around in washington right now about who will take tim geithner's place. he is not going to stick around. i have seen your name on a number of short list. would you serve? >> i am not looking for -- i am going to dodge that question because i am not looking for a government job. this is a very straightforward but. i would be alienating some people. i decided it was more important to get the facts on the table so people could understand there
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were different perspectives and it could have been avoided and it can still be fixed if main street voters need to rise up and make this an issue. tavis: iraq -- a fact that you wrote it. -- i appreciate the fact that you wrote it. the book is called "bull by the horns." that is our show for tonight. thank you for watching. as always, keep the faith. >> for more information on today's show, visit tavis smiley at tavis: hi, i'm tavis smiley. join me next time for a conversation with jeffrey sachs.
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>> there is a saying that dr. king had that said there is always the right time to do the right thing. i try to live my life every day by doing the right thing. we know that we are only halfway to completely eliminating hunger and we have work to do. walmart committed $2 billion to fighting hunger in the u.s. as we work together, we can stamp hunger out. >> and by contributions to your pbs station from viewers like you. thank you. >> be more. pbs. >> be more. pbs.
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